Alcatel's sales up 28% sequentially; losses cut

12 February 2003 -- Alcatel's Q4/2002 sales were EUR4,508m (up 28.5% on Q3 but down 33.4% on a year ago). For Q1/2003 it expects a 25-30% drop year-on-year, but narrower operating loss.

12 February 2003 -- Paris-based telecom equipment maker Alcatel SA's Q4/2002 sales were EUR4,508m (up 28.5% on Q3 but down 33.4% on a year ago). This includes sales for Carrier Networking of EUR2,417m (up 40.5% on Q3, due mainly to DSL in Europe and China, but down 16% on a year ago) and for Optics of EUR741m (up 5.3% on Q3, mainly due to terrestrial networks in Asia and stable metro sales in the US, but down 60% on a year ago).

Income from operations was EUR20m (compared to a loss of EUR227m in Q3 and EUR368m a year ago): Carrier Networking, a profit of EUR279m (up from EUR30m in Q3 and a loss of EUR60m a year ago) but Optics, a loss of EUR285m (up from EUR225m in Q3 but down from EUR291m a year ago). Net loss was EUR1,119m (an improvement from EUR1,352m in Q3 and EUR1,498m a year ago).

Sales for full-year 2002 were EUR16,547m (down 34.7% on 2001) including Carrier Networking EUR8,191m (down 29%) and Optics EUR3,504m in 2002 (down 54%). Sales by geographical region were: West Europe 43%; other Europe 7%; USA 15%; Asia 19%; and RoW 16%. Loss from operations was EUR727m (up from EUR361m), including: Carrier Networking, a profit of EUR214m (compared to a loss of EUR165m) and Optics a loss of EUR839m (compared to a profit of EUR145m). Net loss was EUR4,745m (an improvement from EUR4,963m).

"Q4/2002 sales were up sequentially across all of our business segments and in all geographic regions. This increase, mainly driven by seasonality, was enhanced by strong advances in broadband and mobile infrastructure," said chairman and CEO Serge Tchuruk. "Key objectives in 2002 were to downsize our cost base and strengthen our financial structure...We reduced our break-even level of quarterly sales by more than EUR2.0bn to reach EUR4.1bn at the end of 2002. As we continued to decrease our fixed costs, we were able to improve our income from operations, which turned positive at EUR20m for the quarter in spite of excess and obsolete inventory depreciation. We recorded our sixth consecutive quarter of positive operating cash flow...This was the main driver in reaching a net cash position of EUR326m at year end."

"We have put into place a new [market-driven] organisational structure that focuses on three market segments: fixed, mobile and private communications," Tchuruk continued. "Another steep decline affected world markets around mid-year 2002. The resulting lower level in world demand for telecommunication equipment, such as experienced in the second half of 2002, should underlie the 2003 pattern for our markets. Combined with the weaker Euro versus the US$, this should lead to 2003 markets being down 15% on average, the year-on-year...the decline being higher in the first half due to the timing effect of 2002 market trends."

For Q1/2003 Alcatel expects a 25-30% drop in its sales year-on-year, but narrower operating loss.

"With a quarterly sales break-even target close to EUR3.0bn by year-end, we remain confident that Alcatel will reach our operating break-even target in 2003. We now also expect to break-even in net income from continuing operations (pre-goodwill) before the end of the year," Tchuruk adds.

www.alcatel.com

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